Japan's long recession: lessons for U.S.

A study by the Ludwig von Mises Institute indicates that after Japan's economic "miracle" of the 80s, the country has been in stagnation since 1990.The yen's appreciation in the mid 80s hurt the export sector. Government tried to stimulate growth by easing monetary policy, and in 1996 cut the discount rate (what the central bank charges for loans to regular banks) as low as 2.9 percent.

Following the fiscal stimulus asset prices and real estate skyrocketed, creating one of history's greatest financial bubbles, to which the government responded by rising interest rates repeatedly reaching up to 6 percent, and precipitating a market collapse. Between 1989 and 1992 the Nikkei index fell by 40 percent, from a high of 40,000 to a low of 15,000. By March 2001 the Nikkei had fallen below 12,000 and real estate by 80 percent from 1991 to 1998.

Real GDP stagnated and growth has been negative since 1998. Official unemployment figures indicate a growth in worker idleness from 2.1 percent in 1991 to 4.7 percent in 2000. While these figure may seem low by international standards they are not for Japan where life-long employment has been historically customary and unemployment was never above 2.8 percent in the 1980s.

Japan tried 10 different stimulus programs to arrest the recession, totaling more than 100 trillion yen. The several stimulus packages and income tax cuts failed to curtail the recession, but heavily indebted the government, with public debt exceeding 100 percent of GDP. Some estimates that take into consideration expenses that don't appear in the official budget put the debt as high as 200 percent of GDP.

The Japanese government tried to lend directly to business to revive the economy, but politicians of the Liberal Democratic Party (LDP) run the government agencies that dispersed money and funded their cronies who built bridges to nowhere, projects that didn't benefit the economy and just heavily lined their pockets.

The Japanese government has been propping up moribund companies that make products that nobody wants and therefore real demand goes unmet, and money is steered in a wasteful direction. The study concludes that "This policy is equivalent to the old Keynesian depression nostrum of paying people to dig holes and fill them. Neither policy will revive the economy because neither forces businesses to realign their structures of production to match consumer demands."

Xinhua reported that Japan's trade surplus shrunk 99.7% in first half of 2009 to 8.32 billion yen ($88.5 million U.S. dollars) due to the global financial crisis.

Dramatic increase in homelessness and subhuman living conditions

Japan-Massachusetts relations

According to the Japanese consulate in Boston, "Beginning almost immediately after the Revolutionary War, seafarers on clipper and whaling ships sailing from such Massachusetts ports as Salem and New Bedford traveled to Japan and brought back not only valuable cargo including tea, silk, lacquer ware and precious metals, but equally valuable tales of the exotic East. Soon, these merchants were joined by serious scholars, art collectors, diplomats, and businessmen—all eager to study Japan and its people. Thus, Massachusetts became one of the earliest states in the fledgling nation to establish extensive ties with Japan. Today, these ties are reflected in the high level of Japanese studies in some of Massachusetts' finest colleges and universities...

..by the early 1990s, Massachusetts exported nearly $1.5 billion in goods and services to Japan each year, representing some 14% of the state's total exports and making Japan its second-largest market after Canada. Major items exported include industrial machinery, computer, scientific, electric, and electronic equipment, fabricated metal products, chemicals, and primary metals." We can expect an acute decline of Massachusetts exports to Japan in 2010 due to the island's frail demand.

Japan's ongoing troubles are but another example of a corrupt socio-economic system where the elite gets richer and richer at the same time that destroys the golden goose because of its unsatisfiable greed and avarice, throwing the population at large into prolonged periods of suffering and despair.